Home loans have become a common route for financing residential purchases, and their popularity is evident as seen in recent data. Individual housing loans in India reached INR 33.53 lakh crore in September 2024, as reported by The Economic Times. The Government of India continues to roll out supportive measures that aim to make owning a home achievable to a larger population. Among the most impactful of these is the provision of tax benefits on home loans.
Under the Income Tax Act 1961, borrowers are eligible for certain tax deductions. These are applicable to the principal and interest components of the home loan. The Union Budget 2025 has also introduced certain refinements according to the tax regime. Understanding these details is important to make the most of your home loan benefits.
Major Home Loan Tax Deductions in India
Note: If you’re following the old tax regime, the below-listed tax benefits on home loans continue to apply without any changes. However, under the new tax regime, most of these exemptions, including those under Sections 80C, 24(b), 80EE, and 80EEA are not available. The only exception is a deduction under Section 24(b) for let-out properties.
Principal Repayment Deduction
Under Section 80C of the Income Tax Act, you can claim a tax deduction of up to INR 1.5 lakh annually on the principal portion of your home loan repayments. This deduction is applicable only for fully constructed property.
To claim this deduction, you must not sell the property within five years of purchasing it. If not, the deduction claimed will be reversed in the year in which you sell it and added back to your income. The deduction under section 80C is applicable for both self-occupied and let-out properties.
Additionally, expenses like stamp duty and registration fees incurred during the purchase can also be deducted under this section. The deduction can be claimed only in the year these expenses are incurred.
Interest Repayment Deduction
For self-occupied properties, you can claim a tax deduction of up to INR 2 lakh annually on the interest paid on the home loan under Section 24(b) of the Income Tax Act. There is no upper limit for rented-out property.
The funds secured through a Home Loan must be used for the purchase or construction of a residential property.
This deduction is available only for properties where construction is completed within 5 years. If the construction takes longer, the deduction is limited to INR 30,000.
Deduction for First-Time Home Buyers
If you are a first-time home buyer, you can claim a tax deduction of up to INR 50,000 on the interest paid on your home loan under Section 80EE.
If the property falls under the affordable housing category, then you can claim an additional tax deduction of up to INR 1.5 lakh annually on the interest paid on your home loan under Section 80EE. This is in addition to the deduction allowed under Section 24(b).
Benefit from Tax Deductions On Your Home Loan
To optimise your home loan tax benefits, it’s important to know which deductions apply to your situation. Claims can be made online via the Income Tax Department’s official portal.
If you are planning to finance a new home, choosing the right lender is just as important. IndusInd Bank offers home loans with flexible repayment terms. Enjoy competitive home loan interest rates and more. Apply for a home loan today and benefit from a customised financing solution!
